'Fiscal cliff' will test Republicans, Democrats

By STEVEN R. HURSTThursday November 8, 2012 9:30 AM

WASHINGTON (AP) — The U.S. political landscape changed little with Tuesday's election, and now both Democrats and Republicans will be tested by the immediate need for moderation if they are to avoid the feared "fiscal cliff" of automatic tax increases and deep spending cuts that could send the country into a recession.

The Republican Party is entering a period of introspection after failing to block President Barack Obama from a second White House term, even after a period of the worst financial pain for middle-class Americans since the Great Depression of the 1930.

The election was evidence that the majority of voters are no longer willing to accept the leadership of a Republican Party that has been pushed to the far right of the political spectrum by its small-government, low-tax tea party faction.

But Obama and his Democrats also must be ready for compromise, with Americans yearning to see an end to the deep partisan divide and legislative gridlock that has gripped Washington in recent years.

Obama adviser David Axelrod warned Republican leaders to take lessons from Tuesday's vote. The president won after pledging to raise taxes on American households earning more than $250,000 a year "and was re-elected in a significant way," Axelrod told MSNBC Thursday morning.

"Hopefully people will read those results and read them as a vote for cooperation and will come to the table," Axelrod said. "And obviously everyone's going to have to come with an open mind to these discussions. But if the attitude is that nothing happened on Tuesday, that would be unfortunate."

He pointed out that conservative Republican Senate candidate Richard Mourdoch in Indiana dismissed the value of compromise and instead said Democrats should join the GOP. "And I note that he's not on his way to the United States Senate," Axelrod said. Mourdock lost to Democratic Rep. Joe Donnelly.

Obama was quiet Wednesday but returned to the White House from Chicago, where he held his victory celebration. He spoke by phone with the four top leaders of the House and Senate to talk about the lame-duck Congress that convenes just one week after Election Day. Little major action is expected.

Obama told the congressional leaders he believed "the American people sent a message in yesterday's election that leaders in both parties need to put aside their partisan interests and work with common purpose to put the interests of the American people and the American economy first," the White House said in a statement.

The immediate challenge for both parties is the "fiscal cliff" of across-the-board spending cuts and the end of Bush-era tax cuts that would hit at the beginning of 2013 and cost $800 billion in that year alone. That could upend the slow economic recovery from the Great Recession and the near meltdown of the financial system that Obama was left to repair when he took office four years ago.

On the day after the election, Republicans signaled little readiness to give up their ideological opposition to raising taxes on high-income Americans, as Obama has insisted.

Speaker of the House of Representatives John Boehner said Republicans are willing to consider some form of higher tax revenue as part of the solution — but only "under the right conditions."

Republicans continue to push for lower rates across the board. That theory, known as trickle-down economics and dating to the era of President Ronald Reagan, holds that cutting taxes will vastly increase the size of the income and profit pie, thereby producing more government revenue even at lower tax rates.

Boehner expressed that position yet again as the condition for working for any increase in government revenue in return for Obama's stated — but undefined — willingness to cut spending on crucial social programs.

Republicans still control of the House, leaving Boehner able to block legislation from Obama's White House and the Democratic-controlled Senate.

There appears no quick solution ahead to the country's skyrocketing debt and stubbornly high deficit that has the government now spending more than $1 trillion a year more than it collects in taxes.

Wall Street has one of its worst days of the year Wednesday as traders worried about the "fiscal cliff" and worsening news on the recession In Europe.

Obama's victory and exit polling of voters showed a majority of Americans supported, or were resigned to, higher taxes to begin cutting the national debt, even as unemployment remains slightly below 8 percent.

Republicans could still moderate as they face the reality of the country's slow shift from a white majority to a day when minorities — blacks, Hispanics and Asians — become the majority. Obama's second-term victory was sealed by massive minority support.

Vice President Joe Biden, flying home from Chicago, told reporters that he predicted the "fever will break" on past legislative gridlock after some soul-searching by Republicans.

Police in suburban Cleveland say they're pursuing charges against five customers of a Chuck E. Cheese's after employees were attacked when a manager didn't respond quickly enough to a complaint about a malfunctioning photo booth.

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